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Far-Reaching Implications of Obamacare Delay of Employer Mandate

July 03, 2013

By Avik Roy

I thought I would share the key points from my detailed blog post yesterday at Forbes. First, the decision by the Obama administration will have a useful policy impact — it will lead fewer employers to sponsor health coverage, leading more people to shop for it on their own. This is something that free-market health wonks have long advocated. However, Obamacare’s exchanges, the main venues for individually-purchased coverage, are too costly:

There’s been a lot of debate as to whether or not Obamacare incentivizes employers to drop coverage for their employees. A 2011 survey of employers by McKinsey & Co. found that 30 percent of employers “definitely or probably” would stop offering coverage after 2014; among those who felt that they had the most knowledge of the law’s inner workings, that number rose to 50 percent.

However, the Congressional Budget Office, in a 2012 report, argued that employers do not have a large incentive to dump workers’ coverage. And even if employers dropped coverage for an additional 20 million workers relative to the CBO’s projections, the deficit would not increase, says the CBO, because the subsidies paid to low-income workers would be offset by an increase in tax revenue from lower utilization of the tax exclusion for employer-sponsored insurance.

In general, it would appear that with the rollout of Obamacare’s exchanges in 2014, paired with a delay of the employer mandate until 2015, many more people may enroll in the exchanges. This is both good and bad: good, because it’s a good thing for people to buy insurance on their own, rather than having it bought on their behalf by someone else with their money; bad, because the exchanges are proving to be quite costly, though comparable in cost to premiums in the employer-sponsored market today.

Furthermore, it is highly doubtful that the Obama administration has the unilateral authority to nullify a Congressional statute:

The Affordable Care Act is quite clear as to the effective date of the employer mandate. “The amendments made by this section shall apply to months beginning after December 31, 2013,” concludes Section 1513.

The executive branch is charged with enforcing the law, and it can of course choose not to enforce the law if it wants. But people can sue the federal government, and a judge could theoretically force the administration to enforce the mandate.

So the question is: Would anyone sue the Obama administration over this? Employers, of course, will be thrilled to be spared the mandate for one more year. Democratic politicians, similarly, will be glad to have this not hanging over their heads for the 2014 mid-term election.

The wild-card is left-wing activists. Most, you’d think, would defer to the administration on questions of implementation. I’m no lawyer, but it seems to me that all it would take is for one judge to issue an injunction, for an activist to require the administration to enforce the mandate.

I am not the only person who thinks the employer mandate should be repealed. Here’s Ezra Klein on the subject:

Delaying Obamacare’s employer mandate is the right thing to do. Frankly, eliminating it — or at least utterly overhauling it — is probably the right thing to do. But the administration executing a regulatory end-run around Congress is not the right way to do it.

The Affordable Care Act includes a provision penalizing employers with more than 50 full-time workers who either don’t offer health insurance or whose employees who can’t afford insurance without taxpayer help. Those penalties begin in 2014. At least, that’s what the law says.

It’s a bad bit of policy. In fact, when it first emerged during the Senate’s negotiations, I called it “one of the worst ideas in recent memory.” The reasons are well summarized in this brief from the Center on Budget and Policy Priorities, which looks at an earlier, but structurally similar, version of the idea…

By tying the penalties to how many full-time workers an employer has, and how many of them qualify for subsidies, the mandate gives employers a reason to have fewer full-time workers, and fewer low-income workers…

There are other kinds of mandates that don’t fall afoul of the same problems. “The employer mandate in the House bill was much better constructed from a policy point of view,” says Topher Spiro, director of health-care policy at the Center for American Progress. ”It was based on the percentage of payroll you spent on health care rather than on how many workers you had, so there’s not this weird disincentive related to part-time workers. But it didn’t have the political support to pass.”

The irony is that the worker-based employer mandate got passed in part because employers preferred it to a payroll-based mandate — a fact that puzzled Senate health aides at the time, but that they made peace with in order to pass the bill…

As written, the employer mandate probably shouldn’t go into effect in 2014, or 2015, or ever. It should be reworked in Congress and then the replacement should be signed into law by the president. The White House’s delay might be better policy, but the way the delay was passed is part of a deeply broken process.

Original Source: http://www.nationalreview.com/corner/352625/far-reaching-implications-obamacare-delay-employer-mandate-avik-roy

 

 
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